One inconvenient fact stands between Jim Flaherty and the kind of
budget
the nation needs: Canadians go to the polls on Oct. 19, 2015.

That means the finance minister must wipe out Ottawa’s $26.2-billion deficit by 2015, no matter how anemic the economy is or how depressed revenues are. If Flaherty fails, Stephen Harper will face the electorate as the prime minister who failed to slay the deficit. He will be unable to deliver the two expensive tax breaks he promised in the last election: a doubling of the limit on contributions to
tax free savings accounts
and
income-splitting
for couples with children.

Flaherty learned how rigid the 2015 deadline is when he released his
fiscal update
last November. It projected the deficit would be eliminated by 2016 — a year behind schedule. Within 72 hours, Harper crisply
corrected the record
. “It remains the government’s plan, intention, to balance the budget prior to the next federal election,” he assured Canadians.

The finance minister fell into line. “The prime minister and I are on the same page — we always have been,” he told amused reporters.

Since then, the short-term outlook has worsened, adding to Flaherty’s woes. Most economists have downgraded their 2013 growth forecasts. Alberta’s long-running oil boom has turned into a stubborn bust, constraining the eastward flow of tax dollars. Consumer spending has ebbed. The cutbacks imposed by the U.S. Congress on March 1 are beginning to bite. On the eve of the budget, Ottawa is running about $2 billion behind where Flaherty hoped to be.

His response: an intensified dose of austerity.

“In uncertain global economic times, the most important contribution a government can make to bolster confidence and growth in a country is to maintain a sound fiscal position,” he said after meeting gloom-bearing
private-sector economists
earlier this month.

Flaherty’s Thursday budget — or “economic action plan” to use the Tory euphemism — will provide Canadians with a general map of where Ottawa’s axe will fall. It will be up to individual ministers to divulge the specifics — or withhold them, if past practice is any guide.

The minister’s timetable has little to do with external forces. Most economists shrugged in November when Flaherty indicated it might take a year longer than planned to eliminate the deficit. The financial markets didn’t swoon. The bond-rating agencies didn’t threaten to downgrade Canada’s credit rating.

The only imperative is the prime minister’s desire to proclaim victory before fighting an election.

This will be the third austerity budget Flaherty has delivered. Since he began chopping programs and expenditures, the economy has drooped, the job market has sagged, consumers have pulled back and the corporate sector has hunkered down, sitting on its earnings.

The same formula has delivered worse results in Europe. The German-led European Union has imposed such harsh strictures on four countries — Greece, Portugal, Ireland and Cyprus — that they have little chance of getting back on their feet for at least a generation.

Nobel laureate and New York Times economic commentator
Paul Krugman
has written column after column questioning the wisdom of this strategy. Other international economists are beginning to express doubts. The Canadian Centre for Policy Alternatives, one of the few think-tanks to question the gospel of austerity,
released its verdict
this week: “The current global emphasis on immediate deficit reduction at all costs has been misguided, ineffective and is doing more harm than good.” Workers, young people, civic activists and groups representing the poor, homeless and unemployed have pleaded with the government to ease up.

Flaherty may be able to blunt the impact by closing tax loopholes, deferring expenditures and juggling money internally. But his budget will be harsher than his instincts warrant or the nation’s finances require.

Carol Goar
's column appears Monday, Wednesday and Friday.

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